Does the modification to the indemnification provision in the Black Bear Diner franchise agreement protect the franchisee from liability caused by the franchisor's negligence?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee and Personal Guarantors agree to indemnify, defend, and hold harmless Franchisor, its current and former affiliates, and their respective past and present shareholders, directors, officers, employees, agents, successors, and assignees (the "Indemnified Parties") against, and to reimburse any one or more of the Indemnified Parties for, all claims, obligations, and damages directly or indirectly arising out of the Franchised Restaurant's operation, the business Franchisee conducts under this Agreement, Franchisee's or Franchisee's employees actions or inaction, or Franchisee's breach of this Agreement, including, without limitation, those alleged to be or found to have been caused by the Indemnified Party's negligence, unless (and then only to the extent that) the claims, obligations, or damages are determined to be caused solely by our gross negligence or willful misconduct in a final, unappealable ruling issued by a court or arbitrator with competent jurisdiction.
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
According to the 2025 Black Bear Diner Franchise Disclosure Document, the franchisee's indemnification obligations are limited in cases of the franchisor's negligence. Specifically, the franchisee is not required to indemnify Black Bear Diner for claims, obligations, or damages that are determined to be caused solely by the franchisor's gross negligence or willful misconduct. This protection only applies if a court or arbitrator with competent jurisdiction issues a final, unappealable ruling that the gross negligence or willful misconduct of Black Bear Diner was the sole cause of the damages.
This means that a Black Bear Diner franchisee could still be responsible for covering claims, obligations, and damages if the franchisor's negligence is not the sole cause or does not rise to the level of gross negligence or willful misconduct. The franchisee is responsible for defending and holding harmless Black Bear Diner against claims arising from the restaurant's operation, the franchisee's business conduct, actions or inactions of the franchisee or their employees, or the franchisee's breach of the agreement.
This indemnification clause is fairly typical in franchise agreements, where franchisees often bear responsibility for liabilities arising from their business operations. However, the modification that excludes liability for Black Bear Diner's gross negligence or willful misconduct provides a degree of protection for the franchisee. It is important for prospective franchisees to understand the scope of this indemnification and to consult with legal counsel to assess the potential risks and liabilities associated with operating a Black Bear Diner franchise.